Share of non-performing loans in Montenegro climbs to 19.9% at end-May 2013

By bne IntelliNews July 23, 2013

The share of non-performing loans (NPL) in Montenegro climbed to 19.9% of total gross loans at end-May from 19.5% in April and 18.7% in March, IntelliNews calculations based on central bank data show. The volume of non-performing loans inched up 2.5% m/m to EUR 493mn at end-May.

The end-May share of  loans with payments delayed for over 30 days in total gross loans stood at 27.4%, while their value totalled EUR 680mn, according to the latest central bank governor report.

The rising share on non-performing loans (NPL) has been a key factor constraining credit supply in Montenegro. In February, the country asked the EBRD for help in a bad loans restructuring project that should support the domestic banking industry.

The share of NPL in total loans in Montenegro stood at 7.2% at end-2008 but accelerated to 18.7% at end-September 2012, according to IMF data issued in April 2013. The credit activity has picked up since January 2013 after retreating in annual terms since January 2010 (latest available).

The World Bank said in a June 2013 report on South-East Europe that despite some decline in the level of bad loans due to large sales of problematic assets to factoring companies, the level of NPL in Montenegro remains among the region’s highest. The Bank also warned NPLs in the country are still rising as there has been limited progress on restructuring or resolution.

NPLs in the SEE region started increasing again in the second half of 2012 after briefly stabilising, due to a deteriorating loan quality and difficulties banks have in writing off NPLs because of weak insolvency regimes, the report said.

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